Balls adapts for a growing economy

By Peter Hoskin
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Politicians may have decamped to their constituencies for the summer, but the routine business of Westminster continues. In particular, this week, we’ll have the usual political set-to over the latest growth figures. Most economic soothsayers expect them to be rather encouraging – twice as big as the rate achieved between January and March – and the latest sign that Britain is returning to sustained growth. George Osborne will be pleased.

But what about Labour? What’s their shtick going to be if we keep on growing? The answer is in an article by Ed Balls for today’s Guardian, in which he basically does two things. He tries to put this recovery in an unfavourable context, talking of how “we would actually need to see growth of 1.3% a quarter for the next two years” to “catch up the ground we have lost on growth and the deficit since 2010”.  And he asks the fundamental question: recovery for whom? To which, conveniently, he already has his own answer: “there are growing signs that this nascent recovery is mainly benefiting those at the top.”

The New Statesman’s George Eaton calls this a “smart line of attack”. Myself, I’d qualify that by saying it’s not smart in the sense of requiring much mental effort. Labour were always likely to need a weapon that could be wielded in a growing economy, and re-forging Miliband’s “squeezed middle” thesis was the obvious choice. If anything, Labour should never have let the attack drop.

But it is smart insofar as it’s got some truth behind it. Sure, Balls is exaggerating when it comes to the richest – as the Resolution Foundation points out, “the latest year saw the biggest decline in income inequality in the last 50 years”. But when he writes that “most families are not seeing any recovery in their living standards, with average wages after inflation still falling,” he’s some way closer to reality. As we know from the monthly numbers, the growth in wages is still being outstripped by prices, and that is likely to continue into next year. The squeeze prevails.

In many respects, this is dangerous for the Tories. People may not notice the political class rowing over fractions this week, but they’re sure as Hell going to notice the numbers writ in black-and-white on their supermarket receipts and energy bills. Any notion that things are tougher than they used to be will be bad for Tory chances.

But George Osborne isn’t defenceless. He already has policies – more than Labour – for improving living standards; he has groups like Renewal coming up with new ideas; and, crucially and increasingly, he has growth. Britain’s recovery may not be evenly spread nor particularly fast-paced, but it’s still a recovery. The Chancellor, in this case, might take solace from the fact that Balls has refined his attack.